On 27 May 2013, in the last days of its mandate, the Bulgarian caretaker government adopted a decree for amendments to the Rules of Procedure for the Exercise of the Rights of the State in Commercial Companies with State Participation. The decree was published in the State Gazette on 4 June 2013.
The decree introduces new rules for the selection of a provider of financial services by credit or financial institutions within the meaning of the Credit Institutions Act, which shall be applied by state entities, companies with more than 50% state ownership and companies under their control.
The new rules aim to standardize the methodology for the selection of a financial services provider, increasing transparency and efficiency in the management of the funds of the state-owned companies and diversifying the cash resources. They also aim to reduce the risk of exposure concentration and improve the accountability mechanisms of public companies and enterprises.
The new rules do not apply to state-owned (wholly or in part) companies which are classed as credit or financial institutions under the Credit Institutions Act.
For the first time, state companies are obliged to announce tenders for a credit or financial institution with at least five participants. The leading criteria for choosing a credit or financial institution will be the economic criteria, for example, deposit and account interest rates, loan interest rates, fees and commissions on credits, transfers, guarantees, etc.
State companies with an asset book value of over 3 million Bulgarian levs must adhere to the specific concentration rules, under which their net exposure to a credit or financial institution cannot exceed 25% their total cash resources. The net exposure is calculated at the end of each month based on the balance as at the last day of that month.
Pursuant to the new rules, state entities have a six-month deadline to comply with the above requirements.
Law: Decree for amendments to the Rules of Procedure for the Exercise of the Rights of the State in Commercial Companies with State Participation